Norbit ASA

OSE:NORBT

Earnings Call Transcript 2024-Q3

[Per Weisethaunet, executive]

Welcome to NORBIT's Q3 presentation 2024. Q3 has been another eventful quarter for NORBIT, and we'll take you through some of the highlights and the results for the quarter. At the end of the presentation, we're pleased to give you some guiding for the rest of the year.

So as you can see, as NORBIT has been in the past, also there is some quarterly fluctuation, whereas some quarters comes in better than expected, and some a bit weaker. I think the important thing for us is to see that it's continuing to build up momentum for the future towards our long-term targets.

The revenues for the quarter came in at NOK 372 million, which is a 13% increase compared to the same quarter last year. We'll give you some more details into what's behind that later. EBIT ended at 54% (sic) [ NOK 54 million ]. It's some transaction cost affecting those numbers. We'll also update you on that.

For the full year, we're slightly below NOK 1.2 billion, which is a 6% increase from the year before. EBIT margin 16%, so EBIT nearly NOK 200 million accumulated for the first 9 months.

Main events: we've seen good growth in both Connectivity and -- no, sorry, both Oceans and PIR. In Connectivity, the margin is improved despite slightly lower revenues, which comes from offset, or comes from some postponement of deliveries based on a request from one larger European client.

So good things that's happened in the quarter. We have received orders in the security domain. We've been speaking about a good trend and good momentum in the security space for many quarters now, a good lead pipe building up. And finally, we see that some of these orders are materializing. So in total, we have booked orders for approximately NOK 100 million, although this one was also notified on the stock exchange, the NOK 75 million order.

And as also spoken about before, during the quarter, we announced the new contract where we're going to deliver a new product, a GNSS based On-Board Unit from our Connectivity domain. First order to be delivered Q2-Q3 next year, NOK 160 million. Also in the contract manufacturing part of Product Innovation & Realization, we've taken an order of NOK 50 million from a client in the industry/defense space, also to be delivered Q4 and Q1 '25.

So a little bit into the segments. As you see, Oceans came in at NOK 158 million, which is an increase compared to the quarter before. In these numbers, it's also then consolidated revenues from our latest acquisition Innomar. And we'll show you afterwards the split on the different product lines.

And if you see throughout the year, it's been a bit bumpy. So Q1 in Oceans was disappointing for many of us, and then it came back very strong in Q2. And yeah, so we must admit that Q3 is a little bit disappointing again, but as you will see in the guidance, we expect a very strong Q4.

So the visibility in this segment is, as we've spoken about before, not very long, so it's a short visibility. We're selling high price tag products. So meaning, if a few systems slips from one quarter to another, it will affect the revenues in the quarter.

For the first 9 months, Oceans has delivered NOK 475 million. This is an increase of 13%. EBIT margin of 25%, slightly below what was in the same period in '23.

So going into the mix. So as you see the WINGHEAD sonars in the dark blue, which was very strong last year, has not been as strong this year. The other sonars has grown quite good. Security, same level as it was last year. This is before starting on the new contracts we've announced. And then we have a new category in this sub-bottom profilers, which is the product range coming from our acquisition of the North German company Innomar.

So, yeah, for the surveillance market, as said in [ Italy ], also, we've been really waiting for something to materialize. We still see a very good market. So underwater surveillance, we expect to be an important part for our growth going forward, and it's good to finally have some more substantial orders.

We expect also to be able to collect good orders going forward. But as it's been up till now, it remains that it's a little bit hard to predict when this really materializes. The selling time for this part of the business is longer than what we have experienced before on ordinary sonars.

Connectivity, as said, if you look into 2023, we had very strong sales in On-Board Units for passenger cars. This year's revenues has been affected by a larger European client that asked us to postpone some deliveries due to some internal changes, which we have accepted, and that has affected the numbers. So revenues ended in the quarter on NOK 111 million. EBIT margin 25%. First 9 month, NOK 362 million, which is down from NOK 424 million. And margin for the first 9 months 25% compared to 27%.

Looking into the revenue mix, you see that 2023, we had a very strong On-Board Unit sales, nearly NOK 270 million. This is down to NOK 137 million. And then showing that, despite that, we've been able to grow on all other product lines. So also showing the importance of the part in our strategy to be diversified. So not only diversified with diversified business segments, but also having products within each segment, which has different drivers.

Yeah, so we have spoken about earlier, this new product that we're making. It's a satellite-based tolling unit, where we, in the past, has delivered modules to other vendors of this, stepping up in the value chain, making the full product. This is a major -- an important step for Connectivity. The product is currently under development. It's progressed very nicely. It's a challenging project. That's why it makes sense that we should do this. And we look very much forward to see the industrialization falling in place, the robotic lines and everything, so that we could finalize this initial deliveries in Q2, Q3 '25 and are optimistic about further orders on this product.

I want to remind you all that out of NORBIT's total manufacturing capacity, we use approximately 60% to make our own branded products. In addition to that, we offer on contract manufacturing terms to industrial clients to -- acting as a electronic manufacturing service provider, offer this free capacity.

The demand for contract manufacturing has been strong. I think I've used the expression before to say that Made in Europe and Made in Norway is becoming more and more popular. I think this has also to do with the geopolitical unrest. This has an opportunity from this where we -- it makes sense to make the technology to be not only make your own food, but make also your own technology.

So in the quarter, we delivered revenues in this segment for NOK 114 million, and the EBIT margin on 11%, we find satisfying. So in this segment, that's in the range which we would expect. In Connectivity and Oceans, our target is much higher, because then we offer our own proprietary technology under our own branding into a global market.

For the first 9 months, we had nearly NOK 400 million in revenue, which is a quite steep increase compared to the year before. So showing that with a little bit decline in Connectivity, we've been able to utilize this capacity in the contract manufacturing. So this has been good.

So, as you see, when you look into the revenue split, the major part of this is contract manufacturing going from NOK 224 million to NOK 334 million, so it's more than NOK 100 million increase for the first 9 months. And the R&D services we offer is more or less on the same level as it's been the 2 years before.

Just to remind you of that also, the reason for doing some of these R&D services is mainly because it helps us gain domain knowledge in new domains, which could be important to form the base for what to build NORBIT upon going into 2030-2035.

We recently announced a new contract, as already mentioned, of NOK 50 million from an existing client in the industrial/defense domain. This will be concluded during this year and first quarter next year.

So with that, I'll leave the floor to Per Kristian to give you some more insight into the financial figures.

[Per Reppe, executive]

Thank you, Per Jorgen. I will spend some minutes walking you through the financial highlights of the quarter. Revenues in the third quarter amounted to NOK 371.9 million, up 13% from the corresponding quarter of last year. Adjusted for the Innomar transaction, growth was 6%.

Reported EBITDA for the quarter was NOK 86.6 million and NOK 93 million adjusted for transaction costs. This represent an adjusted margin of 25%, and it compares to NOK 68.2 million, and the 21% margin reported in the third quarter of 2023.

Operating profit was NOK 53.7 million and NOK 60.1 million, again, adjusted for transaction costs, translating into an adjusted margin of 16%. Net finance expenses were negative NOK 4.8 million, where foreign exchange gains partly offset net interest expenses of NOK 10.3 million. Tax expenses were NOK 13.9 million, while net income for the period was NOK 35.1 million.

In the third quarter, Oceans delivered 18% revenue growth year-over-year, and growth was primarily explained by the recent acquisition of Innomar, which reported NOK 22.9 million in revenues. Adjusted for Innomar, revenues were largely flat. Gross margin increased 5 percentage points on increased rental and service income, as well as margin increasing from Innomar.

The revenue growth was mainly offset by an increase in salaries of NOK 17.2 million, explained by consolidation of Innomar, wage inflation and a general strengthening of the organization to prepare for further growth. The EBIT ended at NOK 30.7 million in the quarter, giving a margin of 19%.

Connectivity saw a 4% revenue decline year-over-year on lower sales of On-Board Units, following rescheduling of orders, partly offset by an increase in units for c-based toll collection and increased revenues from subscription and e-toll. Gross margin increased 8 percentage points on favorable product mix, and an increasing share of revenues from subscription and e-toll. The EBIT for the quarter was NOK 21.8 million (sic) [ NOK 28.1 million ] with a margin of 25%.

PIR reported a solid quarter, with revenues increasing 34% on strong demand from industrial clients within contract manufacturing. Gross margin was on par with that of the same period last year, while payroll expenses and operating expenses partly offset the revenue effect, leading to an EBIT for the quarter of NOK 12.2 million translating into a margin of 11%.

Next the balance sheet and the financial position. On the 12th of July, we closed the Innomar transaction and for accounting purposes, the transaction was effective starting 1st of July. Property, plant and equipment, including right-of-use assets, increased NOK 20.5 million in the quarter, following consolidation of Innomar and investments in machinery equipment and lease additions for new production equipment, net of depreciation.

Intangible assets rose NOK 90.4 million to NOK 402.8 million, where NOK 81.7 million was fair value adjustments relating to the Innomar transaction. Inventories increased NOK 9.4 million in the quarter, but was largely flat when adjusting for consolidation of Innomar. Trade receivables was up NOK 12 million in the quarter, but was down NOK 10.5 million net of Innomar. While trade payables decreased NOK 8.7 million with no material impact of the Innomar transaction.

Net interest bearing debt stood at NOK 352.4 million at the end of September, an increase from NOK 184.4 million at the end of the previous quarter on debt financing of the Innomar acquisition. Our equity ratio was 51% in the quarter, on par with the level reported at the end of June.

In the third quarter, our net interest bearing debt to EBITDA ratio increased to 1x, and our liquidity position remained strong at NOK 528 million at the end of the quarter. In the quarter, we performed and conducted several financing activities in connection with the acquisition of Innomar and to strengthen the capital base for further growth.

The transaction with Innomar closed for a total purchase price of EUR 40.2 million, financed EUR 35.4 million in cash and EUR 4.8 million in consideration shares to the founding management. For the cash portion, we entered into a EUR 38 million loan. The loan carries a margin of 175 basis points, subject to our net interest bearing debt to EBITDA ratio being below 2.5x, which is the higher end of our financial policy. And the margin is a 40% -- basis point reduction compared to the last term loan issued.

And in order to strengthen the financial flexibility and capital base for further growth, we raised NOK 200 million in gross proceeds through an equity private placement.

After these transactions, our balance sheet continues to provide for a strong financial platform to deliver on our capital allocation framework and the ambition plans we have set out towards 2027. In addition, by repaying existing term loans and issuing a new loan at the improved terms, we have lowered our cost of funding, tax optimized our financing so that the blended cost of borrowings stood at 4.1% post-tax compared to 5% previously.

Lastly, the cash flow for the quarter. Cash flow from operation was NOK 83.8 million, explained by an EBITDA of NOK 86.6 million, a net decrease of NOK 12.9 million in working capital. Taxes paid was NOK 11.1 million and NOK 4.8 million in net finance expenses.

We invested NOK 439.5 million in a quarter, explained by NOK 402.7 million in net cash proceeds for the acquisition of Innomar, NOK 25.4 million in R&D investments, and NOK 11.3 million in investments in machinery and equipment.

For 2024, we expect our R&D investments to end up around NOK 90 million for the year, above the initial guidance on development of the GNSS OBU, as Per Jorgen mentioned, where we have an initial NOK 160 million contract to deliver on next year. Our investments in fixed asset this year is expected to be around NOK 85 million to NOK 90 million below the initial guidance. So far this year, we have invested NOK 72.5 million in machinery, equipment, including the least portion of that part.

Cash outflow from financing activities was NOK 405.6 million in the quarter, mostly explained by raising NOK 446.1 million in loan financing, NOK 193.8 million in net proceeds from equity private placement and NOK 233.7 million in repayment of loan and leases.

Then I will give the floor back to Per Jorgen for the outlook section.

[Per Weisethaunet, executive]

Thank you, Per Kristian. Yes. So looking into Q4, we would remind you that Q4 is normally in our Oceans domain, the strongest. This has an element of clients doing some budget flushing and it's also still good activity when it comes to surveying during Q4.

So this time, we have a quite wide range on the guidance for Oceans. So we say that Oceans in the fourth quarter will be in the range between NOK 240 million and NOK 300 million. The reason for this wide range is that we see that this larger surveillance security contract that we have announced might slip into first quarter of 2025. So the lower end of the guidance reflects the possibility of this. It might be that we will conclude it also during Q4.

In Connectivity, we expect to be in the range between NOK 140 million and NOK 150 million. And this is based on increase in the sales of ordinary On-Board Units again and also on enforcement modules for tachographs that we see is increasing.

In the product innovation and realization, we also expect a strong quarter to be in the range of NOK 150 million to NOK 160 million. Yes, and this is based on what we reported also on new contracts from existing clients. So if you do this math and sum it all, you would see that being in the mid of all ranges, you would end up on the full year revenue around NOK 1.75 billion with -- and we repeat that we expect the EBIT margin approximately around 20% for the full year.

Plotting this into our 2027 ambition plan, we see that 2024 is one step in the direction toward our 2027 target. And we're now finalizing all plans for 2025. And when we present our full year coming back here in February, we will also give you then our target for 2025. But we are very positive for the outlook also for 2025 that should be a step again towards our 2027 target. Yes.

And the margin picture, as you see, so we are already running on the right level when it comes to margins. And we think this is a sound level to continue aiming for.

So I think with that, the presentation is concluded. But if there is some questions, go through that.

[Per Reppe, executive]

We can take a few questions from Jeppe first.

[Jeppe Baardseth, analyst]

Jeppe, Arctic. How confident are you on your '24 revenue target of NOK 1.75 billion in revenue, given the wide range in Oceans? it seems that much of the revenue is dependent on the GuardPoint contract, but also revenue in Oceans, given it's very volatile and much happening in December in the Q4 quarter.

[Per Reppe, executive]

Well, I think we're as confident as we can be. I mean the NOK 175 million is a midpoint of what the segments are expected to deliver in Q4. This is the current outlook for what we're seeing in the market. We're still not at the end of this quarter. So, obviously, we need to work more towards that target. But I think we're pretty confident that we will land this year around the level that we have communicated today. So -- and of course, the security project is the reason why we have this range today.

So we will probably know a little bit later this quarter how that project progresses. But of course, this will also be an upside in the way that we have communicated the guidance for Q4.

[Per Weisethaunet, executive]

And maybe I'd like to add to that also that it's -- the uncertainty is then an effect if it goes into Q4 or Q1. So it's not -- the uncertainty is not if you have the contract or not, because the contract is in hand and the preparation to deliver it is well progressing. So the uncertainty is the timing if it's December or January.

[Jeppe Baardseth, analyst]

And in terms of timing on the OBU contract that was rescheduled in Q2 or Q3, is it -- could that be rescheduled further? And how dependent is your Connectivity revenue target in Q4 on that contract?

[Per Reppe, executive]

Well, the contract itself is not -- or the Q4 outlook in Connectivity does not hinge on that contract itself. The rescheduling of the orders is also part of a longer-term partnership with that client in which we have been able to extend that agreement with the client. But of course, we have agreed to deliver lower volumes this year. But in total, the contract is actually better for us if you have a longer-term perspective on it. So yes.

[Jeppe Baardseth, analyst]

And then to, I guess, your '27 target, it seems that your Connectivity target of NOK 1 billion in '27 is much dependent on the GNSS OBU. What can we expect from this product in the years ahead?

[Per Weisethaunet, executive]

So I think looking into NORBIT, what are we doing? I mean, under the logo, it says, explore more. We're looking for new products to set up so that we could accumulate more revenue streams. And looking into 2027, yes, the GNSS On-Board Unit is an important part of that, other product line existing also important. And I think coming to 2027, we will give you some more products that you will have to dive into to understand the drivers behind also as we've done in the past.

[Unknown Analyst]

[ Ivar ], Arctic. I believe on the Q2, you mentioned the possibility of additional GNSS OBU contracts, as you also mentioned today, could we see contract announcements this year?

[Per Weisethaunet, executive]

So when we have some announcement you will see the announcement. It will be announced when it's needed to be announced.

[Unknown Analyst]

And on Oceans and GuardPoint, visibility, is it better within GuardPoint versus the other segments in Ocean? How are you working there?

[Per Weisethaunet, executive]

So if you look into the GuardPoint, I mean, when you have the contract in hand, you will have visibility for a period because it takes more time from you have the order until you will deliver. But we have experienced that it's a bit hard to predict when you get the order because the sell-in time is longer, and it's hard to predict. So it's yes and no when it comes to the visibility. But the lead pipe is still strong and growing.

[Unknown Analyst]

Just one question on the longer term, looking at the 2027 targets. Will there be the same segments as we have today with PIR, Oceans and Connectivity? Or do you believe you will have further silos with other?

[Per Weisethaunet, executive]

In the 2027 ambition, that is on the existing segments that -- so if you follow NORBIT long term, it could be that we decide to step into other verticals also, but that would then be in addition when it comes to the target.

[Per Reppe, executive]

We have some questions from the web as well. What is the nature of the revenue for the line satellite-based tolling? Is it a primary hardware or subscription-based?

[Per Weisethaunet, executive]

Yes. So we have -- I could maybe go back to that slide to be more accurate. So in this, where it's called satellite-based tolling, that is hardware revenues. So in the subscription and e-toll part, which primarily comes from an acquisition we did of a company called NORBIT iData, we acquired them 3 years ago. It's also some satellite-based part in that, and that is fully subscription-based and some more like Software-as-a-Service part.

[Per Reppe, executive]

Yes. And maybe a related question. What drove the increase in satellite-based toll collection, subscriptions and e-toll services in Q3? Was this a onetime effect or a sustainable trend?

So when it comes to the subscription and e-toll part, which is sort of recurring in nature, that has a quite steady growth, generally growing at 10% to 15% a year. So shouldn't be any much bumps from a quarter-to-quarter, neither in the year-from-year, more stable growth.

The satellite-based toll collection part is -- could be a little bit more bumpy. It depends a little bit. And usually, our clients in that domain are more project delivery specific, which means that you could see quarters where the satellite-based tolling revenues for us would be quite big in one quarter, but then it could be lower in another quarter.

So it's a little bit more fluctuating, and we could also see that in the past numbers that we have presented, whether or not this is a onetime effect or a sustainable trend. So I think I've spoken a little bit about the subscription part, we see stable growth in. When it comes to the satellite-based toll collection, we definitely see that there is a trend in Europe that more countries are moving into distance-based charging, which obviously supports us as a hardware supplier.

But then also Per Jorgen mentioned, the GNSS OBU project that we're working with where we are moving from a component delivery model to a more full system GNSS OBU deliverable. So it means that we will take a step up in the value chain. And of course, this has a major effect on the revenue side and the potential in Connectivity over the years to come.

So second question, how does NORBIT plan to avoid the fate of Norsk Data, which was ultimately outcompeted by larger international players? So this one is for you.

[Per Weisethaunet, executive]

So I'm afraid I don't have sufficient insight in what happened with Norsk Data. But if it's possible that someone could teach me and we could get a vaccine for what happened to them, then we will take it. But if the question is related that we could fade away and be destroyed by international competition, I think -- so where NORBIT is exporting more than 85% of what we deliver.

So I mean, we -- from day 1, we've been in an international competition. And I think how we defend towards the competition is that we prioritize to go into projects where we see that it's needed to tailor some technology. It should be hard to create, to give them some threshold that others could come and outcompete us. And yes, so I think that's one of that. So tailored technology and carefully selected applications, that's the main strategy in the past, and I think it's very valid for us going forward also. And I'm sorry for Norsk Data.

[Per Reppe, executive]

How does NORBIT ensure it has the necessary flexibility to change course when a strategy isn't performing as expected? To what extent are we willing to make rational, albeit potentially unpopular decisions, to adapt to a shifting market condition and maintain competitiveness?

[Per Weisethaunet, executive]

I think that's a very good question, and it's a very important question. And I think this is really at the core of what we're trying to do, looking forward, trying to be market-driven and not trying to continue to push what's been good in the past, to try to create new stuff that's relevant for the future. Yes. So I think that's in the DNA of the company. So it's a good question, but I don't really know how to answer it.

[Per Reppe, executive]

You said in second quarter that you expect revenues in the lower end of NOK 1.7 billion to NOK 1.8 billion for fiscal year 2024, excluding Innomar. You now state that you expect around NOK 1.75 billion. Aren't you by that effectively lowering the revenue guidance? And have you so far experienced any negative surprises related to Innomar? And there is a reference to Innomar delivering full year revenues of NOK 250 million plus in 2023.

So I think first correction, I think, is that Innomar reported in fiscal year '23, '24, which ends 31st of March, they delivered EUR 10.5 million, so NOK 250 million plus, which obviously then brings us to the guidance. So Innomar for second half of the year is expected to deliver around half of what we did last year, which then means that we are actually maintaining the guidance that we gave at the Q3 -- Q2 reporting. So there's no change in that guidance.

And have we experienced any negative surprises relating to Innomar?

I would say no, quite the opposite. I think the interaction with the company is moving well. We have a quite clear path on what we intend to do together with Innomar, both on the technology side, but also on the distribution side, where we have a very strong sales and distribution platform already. So there's a lot of opportunities and synergies that we see that we would like to explore more. So, so far, so good when it comes to Innomar.

A few questions on Oceans for you, Per Jorgen. You state that your subsea sonars are in the price range of NOK 1 million to NOK 3 million. Do all your sonars, excluding security, fall into this pricing range?

[Per Weisethaunet, executive]

We have also some products which has a lower price tag. I think we spoke a little bit about this on the Q2 presentation, where we also make some new sonars that is tailored for integration on unmanned -- underwater vehicles. They are more high volume and lower price tag. This is reported as OEM-based revenues on our side because the market in that space is a little bit different where we work towards several different manufacturers of autonomous underwater vehicles and help them integrate our solutions into that. So I think it's also products with a higher -- with a lower price tag. But margins more or less in the same range.

[Per Reppe, executive]

You have been steadily strengthening the organization Oceans. Will there be any new products launched in 2025?

[Per Weisethaunet, executive]

I think we will get back to that when we have something to state. And I'm a little bit -- to be a little bit humble when it comes to this also. I think it would -- every time coming to present our quarterly results, it would be awesomely good for us to talk about the new products we are creating, but we're very cautious of doing that because we don't want to speak to our competition of what we are doing. So -- and when it's a conflict of interest in the communication in the IR domain and the commercial domain, the commercial domain is the winner. So I think that's why we are not talking so much of what's coming.

[Per Reppe, executive]

Are you seeing increased adoption of your subsea sonars, excluding the DDS, so the detection sonars in defense-related use cases? Are you intently targeting this area?

[Per Weisethaunet, executive]

Yes. So if I understand the question correctly, so I mean this is the GuardPoint of our business. And this is -- the diver detection element is one of the important elements in what we address with the GuardPoint. And one of the -- in a surveillance part, you want to detect all kind of intruders, it could be divers or it could be also small underwater drones, which is the interesting thing to detect.

[Per Reppe, executive]

Yes. And I think what we define being defense security related is reported also under the security part. But in addition to the driver detection sonars, we also offer some forward-looking sonars, which might be used for defense-related use cases. So whether or not we're seeing increased adoption to that, I think there is certainly a good trend in that market. So hopefully, we can see more of that going forward.

Yes. And then there is a question about seasonal sales pattern in Innomar. A question to that is that not as much as what we see on the sonar side, but the quarterly fluctuations must be expected also with Innomar. It's expensive systems. So one system shifting into the next quarter has impact on the numbers.

And then there's a question related to the WINGHEAD. Has anything changed in WINGHEAD's growth prospects since it's not growing?

[Per Weisethaunet, executive]

I think that's also a good question. And if you look into the numbers, 2023 -- first 9 months of 2023, WINGHEAD was especially strong. And we think that part of that has been towards the offshore wind industry, where a lot of rental companies also acquired WINGHEAD systems to be ready for that. We expect WINGHEAD to continue to grow. We see -- I think it's fair to say that we've experienced that for Q4, the WINGHEAD sales is -- yes, we're happy with the WINGHEAD sales so far.

[Per Reppe, executive]

Is visibility for sub-bottom profiler similar to that of sonars?

Largely, yes, maybe slightly better visibility, but not much.

Then there's a question for Connectivity. There are regular press comments on the slowdown of German automotive volumes. Is this affecting NORBIT at all?

[Per Weisethaunet, executive]

So I think in the automotive -- so the automotive driver into Connectivity is mainly then manufacturing of new trucks. So we did expect to have some higher numbers and more revenues on the Connectivity modules for enforcement of tachographs this year than we have shown. If this is affected by a slowdown in the automotive, if that's the explanation, not fully sure. It could also be that -- because part of this revenue growth we're seeing on that product line comes from the change in the directive in EU where they need to retrofit also an existing fleet.

And it looks like even if their time line for getting this fitted is coming very close, it looks like this has been a little bit slower than expected that maybe some of the truck owners don't bother until they see that the authorities start to enforce this. So yes, I think that's the insight we could share.

[Per Reppe, executive]

And then to end up with a few questions about the security contracts. Are you able to say any more about the type of infrastructure the new security systems will protect?

[Per Weisethaunet, executive]

Unfortunately, we're not allowed to do that. What I could do is I could repeat the example that we have talked about in the past, where the first delivery we had was for a desalination plant in the Middle East, where -- this is a spot where they make freshwater for the public based on saltwater in the sea. And they, for sure, don't want any intruders to make any impact on the plant itself. So that's one example. But there are several. But given that this is part of the -- it's a security system, we will not be allowed to disclose that we have delivered that.

[Per Reppe, executive]

Is the interest in underwater security systems in any particular geography or across the world?

[Per Weisethaunet, executive]

I think it's across the world, but it's maybe strongest right now in the Europe, Middle East region, I would say.

[Per Reppe, executive]

And last question, does the security contract generate recurring revenues?

The answer to that is broadly no. It's a system delivery. There's an element of service into that, but that's a very small part of the revenue in total.

I think that wraps up all the questions from the audience here and on the web.

[Per Weisethaunet, executive]

Good. So thank you for taking the time and for asking good questions.